Artikel
Discrete-time dynamic principal-agent models: Contraction mapping theorem and computational treatment
We consider discrete-time dynamic principal-agent problems with continuous choice sets and potentially multiple agents. We prove the existence of a unique solution for the principal's value function only assuming continuity of the functions and compactness of the choice sets. We do this by a contraction mapping theorem and so also obtain a convergence result for the value function iteration. To numerically compute a solution for the problem, we have to solve a collection of static principal-agent problems at each iteration. As a result, in the discrete-time setting solving the static problem is the difficult step. If the agent's expected utility is a rational function of his action, then we can transform the bi-level optimization problem into a standard nonlinear program. The final results of our solution method are numerical approximations of the policy and value functions for the dynamic principal-agent model. We illustrate our solution method by solving variations of two prominent social planning models from the economics literature.
- Language
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Englisch
- Bibliographic citation
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Journal: Quantitative Economics ; ISSN: 1759-7331 ; Volume: 11 ; Year: 2020 ; Issue: 4 ; Pages: 1215-1251 ; New Haven, CT: The Econometric Society
- Classification
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Wirtschaft
Computational Techniques; Simulation Modeling
Information, Knowledge, and Uncertainty: General
Asymmetric and Private Information; Mechanism Design
- Subject
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Optimal unemployment tax
principal-agent model
repeated moral hazard
- Event
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Geistige Schöpfung
- (who)
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Renner, Philipp
Schmedders, Karl
- Event
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Veröffentlichung
- (who)
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The Econometric Society
- (where)
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New Haven, CT
- (when)
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2020
- DOI
-
doi:10.3982/QE960
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- Renner, Philipp
- Schmedders, Karl
- The Econometric Society
Time of origin
- 2020
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